ADMS2610-Session2-Ch9.docx

ADMS2610
Session 2
Chapter 9 (pg. 162-170)
Requirement of Legality
Two Types of Corporations
- Regular Corporations
o Same powers as a natural person
o Limitations through internal bylaws (articles of incorporation) are not
public knowledge but may in certain cases bind the public
- Special Act Corporations
o Powers controlled by Special Act
o Limitations are public knowledge because they are contained in a
statute
Ultra Vires (an act that is beyond the legal authority or power of a legislature or
corporate body)
- Special Act Corporations
o Not bound by contracts that are ultra vires
- Regular Corporations
o Bound by contracts that are ultra vires—Internal Management Rule
Labour Unions
- Ability to enter into contracts (collective bargaining agreements) allowed
under labour legislation
o Normally would be unenforceable (restraint of trade)
o Can’t sue anyone, can’t be sued by anyone
Bankrupt Persons
- Declared bankrupts have limited capacity to contract
- Until receipt of a discharge, the person may not enter into any contract
except for necessaries
Requirement of Legality
- Contracts that offend public good are unenforceable
- Contracts whose purpose is illegal, may be illegal are enforceable
- Some contracts are only rendered voidable by public policy or by specific
statutes
o Voidable if the parties do not comply with statute or the policy
Legality under Statute Law
- Generally
o Illegal contracts is an agreement to commit a crime (rob, assault,
abduct, murder, steal goods)  If two parties agreed to rob a bank, it would be an illegal
contract and subject to criminal penalties as a conspiracy to
commit a crime, even if the robbery did not take place
o Embezzlement is when a crime is discovered by an employee,
promises the employer not to report the crime for restitution (money)
o Prostitution is not subject to criminal offence since the person is
entitled to pay income tax on it.
- Competitions Act
o Statue law renders illegal any contract or agreement between
business firms that represents a restraint on competition
 It is unenforceable
 Act covers a number of business practices contrary to public
policy
- Administrative Acts
o Statue law and other criminal law may render illegal contracts and
can be unenforceable
o Agreements to void Workers Compensation, land use planning or
wagering laws (made in violation of the Act void and unenforceable)
- Insurance Policies
o Wager (bets) are unenforceable contacts as a general rule
o Exception is insurance contracts such as life insurance
o Requires an insurable interest
 Distinguishes insurance contracts from normal wagers
- Unlicensed Persons
o Contracts with unlicensed trades or professions are illegal
o Purpose is to protect the public
o Must still pay for goods supplied but not for services rendered